After a rise of over 130% from its March 2020 lows, at the current price of $42 per share, Dish Network stock (NASDAQ: DISH) still looks undervalued. Dish Network’s stock price has rallied from $18 to $42 off the recent bottom compared to the S&P which moved 90%. The rally was driven by the company posting better than expected results from Q2 2020 to Q1 2021. Also, the announcement that Dish Network has decided to partner with cloud computing giant Amazon Web Service (AWS) to sell 5G wireless services to businesses has given a boost to the stock price. The gradual opening up of the economy is expected to lead to recovery in consumer spending in the coming quarters. This will drive the commercial/industrial customers to come back to its fold as the current crisis gradually abates. Additionally, as the company continues on its track of 5G expansion, revenue and margins are set to improve in 2021. Thus, despite being 67% above its 2018 levels, DISH stock still has a potential upside of about 20% from its current level. Our dashboard DISH Network (DISH) Stock Has Gained 67% Since 2018 provides the key numbers behind our thinking.
Some of the stock price rise between 2018-2020 is justified by the 14% increase in Dish Network’s revenues from $13.6 billion to $15.5 billion, benefiting from Boost Mobile and Ting Mobile acquisitions. On a per share basis, revenue increased slightly from $29.1 in 2018 to $29.5 in 2020 as the number of shares also went up post the acquisitions. The P/S multiple remained close to 1x in 2018 and 2020. The multiple has gone up since the beginning of 2021 and currently stands at 1.4x as the stock price increased sharply in anticipation of faster revenue and earnings growth in the coming quarters on the back of recent deals and 5G expansion. The P/S multiple is expected to remain elevated at current levels.
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The coronavirus crisis induced lockdown affected economic activity and hit consumer spending. With demand for streaming services from Netflix, Amazon, and Disney increasing, the demand for Dish’s offerings was adversely affected. This was confirmed in the Q1 2020 results where the company lost 413,000 net Pay-TV subscribers in the reported quarter compared with 259,000 lost a year ago. Moreover, DISH lost nearly 281,000 net Sling TV subscribers and 132,000 DISH TV subscribers. However, there were signs of recovery in the remaining quarters of 2020 with the company surpassing analysts’ expectations. Revenue for full year 2020 increased 21% y-o-y due to the acquisition of Boost Mobile and Ting Mobile.
Any further recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard Trends In U.S. Covid-19 Cases provides an overview of how the pandemic has been spreading in the U.S. and contrasts with trends in Israel. With investors’ focus on 2021 and 2022 numbers, markets seem to be buoyed by the announcement that Dish Network has decided to partner with cloud computing giant Amazon Web Service (AWS) to sell 5G wireless services to businesses, which has given a boost to the stock price. Dish Network plans to connect its 5G network hardware and management software through AWS – the biggest computing service provider. It is also expected that Dish will prioritize its focus on enterprise before consumer retail wireless. This is likely to help Dish tap a wide market in association with Amazon’s AWS as 5G enterprise applications are expected to come up in smart factories, drones, autonomous vehicles, remote health care services, and many more areas. Dish plans to launch 5G wireless services in its first market – Las Vegas – in the latter half of 2021. As the company continues on its track of 5G expansion, revenue growth is set to improve further in 2021 and 2022, which will lead to further uptick in the stock. Based on Dish Network valuation, Trefis has a price estimate of $50 per share for DISH stock. This reflects a potential upside of about 20% from its current level.
5G wireless technology is a hot trend. Which stocks should you pick? Check out our theme on 5G Stocks for details.